The rupee strengthened in the first half of 2010 and stabilised in the second half to average SRs12.1:US$1 for the year, 11.3% stronger than in 2009, buoyed by the success of economic reforms. The rupee averaged SRs12.3:US$1 in January 2011, unchanged from December, although we continue to forecast gradual rupee depreciation, not only because of US-dollar strength resulting from global-especially euro zone-economic uncertainties, but also because of Seychelles' gaping current-account deficit, even if it is set to narrow slightly and foreign reserves are expected to accumulate. However, the large currency swings witnessed following the rupee's flotation in October 2008-which saw the rupee slump to SRs16.8:US$1 before rebounding to a peak of SRs10.3:US$1 in October 2009-are unlikely during the forecast period. This reflects confidence in Seychelles' reform programme and the rebuilding of foreign-exchange reserves. These totalled US$211m in November 2010-equivalent to about two months' import cover (compared with less than two weeks at the height of the debt crisis in 2008)-although holdings remain below the recommended three months minimum. We expect the rupee to slide gently from SRs12.1:US$1 in 2010 to SRs12.5:US$1 in 2011, recovering to SRs12.4:US$1 in 2012 as the current-account deficit narrows, shocks notwithstanding.